Is The £40k ‘Luxury Car Tax’ Wrong?
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- Опубліковано 24 сер 2023
- The barrier for the (so called) luxury car tax is £40k. Should that be changed now as things aren't what they were when this started.
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If nothing else, the limit should be raised in line with inflation since it was first introduced.
Yep, exactly
When it was introduced in 2017 I bought a new BMW 520d Touring, with a couple of cheap options, which was just under this £40k ‘Luxury’ tax bracket. Now, the exact same car is £52k.
If it’s not adjusted then in a handful of years, more cars will be in it, than not.
It’s also tax on top of tax - This Luxury tax is based off the P11d price, which includes VAT
They have not raised other tax allowances and dropped CGT dramatically, a way of raising tax revenues whilst saying they aren't raising taxes
When we bought our model 3 RWD in March 2022 I modelled the whole ownership costs against an ICE Astra estate. The new tax and luxury car tax we will be hit with will now remove the cost advantage of the Tesla which is very disappointing after the idea was to also be able to reduce our emissions.
I wouldn’t consider £40k to be a luxury car either with what you can get for that now
Exactly right. The threshold should be reviewed. What % of the population would you expect to have a luxury car. If a significant proportion of cars sold are liable for this additional cost it can hardly be luxury. I guess some might say being able to buy a brand new car is a luxury though.
On the cost of EVs I don’t think a lot of people are aware of how expensive ICE cares are now. Most average family cars are around 28-30k. It’s not just the cost of the vehicles. I doubt most are bought with cash so the financing costs are way higher too!
Exactly, over £40k is now a 'Family Car Tax' , surely real Luxury cars are £60k+ these days.
So currently just another Tax on owners...
The problem with taxes is that Governments become addicted to them and they only ever go in one direction.
Why not just make it a percentage of the OTR price (say 0.5%). This would avoid the problem of being a couple of pounds above a threshold and being clobbered for hundreds.
There use to be a 5% car tax
The luxury car surcharge existed many years prior to 2021! I bought a new BMW X3 in 2015 and had to be careful on the additional spec to avoid going over £40k and triggering the tax!
I just checked and the same spec X3 now is £57k.
The luxury car tax is operating as the government intended though! It had little resistance when it was introduced because it affected a low percentage of car sales. As you correctly identified, it now affects fairly ordinary cars, and I said back when it was introduced a decade or so ago that it was a ‘Trojan Horse’ that would eventually apply to almost all car sales.
Rampant inflation has just brought the date forward (much to Fishy Rishi’s hand rubbing glee).
I didn’t know it was a thing and bought a 420i and went over the threshold by £300 for privacy glass :/
it was introduced in 2017 so if you bought a car in 2015 it was not affected by this tax
Very good point, i have been looking at updating my car and while i am not going to pay 40K for a brand new car, what i am after is a low mileage up to one year old car for around the 30K to 33K mark.. BUT while steep initial depreciation may make them affordable many of these slightly used cars are in the 40K luxury bracket for tax meaning i will be paying the extra tax for years to come... it should be based on the cars value when sold, if 2nd hand it is under 40K then we should not have to pay the extra, for me it puts many nearly new cars out of my "affordable range"..
I was in the same position a couple of years back. Bought a 14 month old Peugeot 508SW First Edition for £21k BUT have to pay the "luxury car tax excess" because, when first registered, my car cost £41k. It's definitely worth keeping in mind when thinking of buying secondhand.
Just used the Bank of England inflation calculator to see what £40,000 in 2017 would have been in April 2023, which I believe is the anniversary of its introduction, and got £50,475.33. Note, while I could pick the month within this year, I couldn't for 2017, so there's a little room for error there, but it's still a big change.
What I would be asking is exactly what this so called luxury tax is going to be used for. ?
Here in France, we have a tax called malus which is basically a tax that is applied on first registration to the most pollutant petrol or diesel powered cars .
This can range from 145 euros on maybe a citroen diesel right up to 21k for a new 911 Porsche.
This tax is then given as an ecological bonus to those buying a electric car this bonus applied by the garage at the point of sale can be a minimum of 5k and a maximum of 7k.
There is also a scrapage allowance for those scrapping a car registered before 2011 and is between of 2.5k and 6k for a old diesel engine car.
This makes changing up to a new electric car, in most cases cheaper than the petrol equivalent car.
I myself scrapped a 2008 diesel Toyota and with the ecological and scrapage bonus was able to buy a new Tesla model Y for 33k euros about £28500.
this type of incentive is enabling even the poorer household's to change up to a ecologically more efficient electric car.
This would be a great incentive in the UK if this luxury car tax was given back to the people in the form of a large grant to help people to go electric.
Most EU countries at the moment have various grant's available to encourage people into electric car's .
It does seem a little unfair that people in the UK are expected to pay so much without any incentives for an electric car compared to what we pay in the EU.
Fortunately we are used to it and expect nothing less from this odious government
@@garysmith5025
Q: Where is the capital of the United Kingdom?
A: In the offshore bank accounts of the 1%
Yes, it's completely wrong. It should start from £40k but it should be a cheaper amount than a Taycan at over £100k like you said.
Staggered approach is the sensible route, however with tax revenue from fuel duty due to fall I can see the ‘luxury’ bracket becoming a flat rate ‘new car of any value’ bracket to help make up the shortfall
After 2024 there shouldn't be a luxury tax as road tax on ev's is going to be implemented....
This govt is screwing money out of everyone because of all the fraud during covid and cost of living,instead of nationlize the power industry they fling money at us instead of fixing the main problem,ev charging are going up in price so why buy an ev UNLESS u go 20mls a day and charge at home but of course Electric prices in homes are lower than outside but still high so the govt is raking it in 😡
Sliding scale is best. Perhaps an extra 1% for every £10k above £50k, allowing for inflation since the tax was first introduced. In reality, I think it is highly unlikely that any reduction will be forthcoming, it seems that only the tax on petrol and diesel has been frozen while it is the bands for everything else.
Certainly do. My new PHEV Kuga cost me £39500. I have to pay the extra tax as it is based on list price, not what you actually paid!
One issue with your numbers… the OTR price includes the first year road tax which is often quite a lot (think 500-2000). But that isn’t included in the 40k luxury car tax threshold. So more of those cars quoted won’t attract that tax.
Also the govt left it as is on purpose. It’s tax and they want more of it.
And don't forget: under this government the personal tax burden for ordinary people is the highest that it has been for 70 years.
It’s now just a stealth tax that never gets highlighted so thanks for doing that EVM, hopefully one of the outrage tabloids will pick up on the fact it’s been 40k for way too long.
The price of cars in last 5 years have increased massively. A lot of people don’t realise how much all new cars cost now. When I was looking for a new car at beginning of the year. Originally was looking for a Audi Q3 sport back black edition 1.5. Was amazed that it was coming in at 41 grand with a few options. Plus was told by dealer that over a year wait. Looked at used versions and they were almost the same as new price.
Welcome to EV world 18 months ago
During the p*******c my mate had 3 Ford Pumas. Apparently the only car they were making at the time and the dealer wanted them for used car sales, so he got the new ones for almost exactly what he was paying for the one it replaced. Bonkers
@@dwftube I've been trying to work out why the Puma the top selling UK car of 2023
@@IanMcc1000 I think it's appeal is that its halfway between family hatch and small SUV. It's a bit Mr. Blobby for me.
The tax breaks given to electric cars are very unfair and totally arbitrary. Just as unfair is this useless government forcing car manufacturers to sell a certain proportion of electric cars. I don’t want one. Their costs of ownership are too expensive and their utility insufficient for my needs. I also really want to know where EV batteries are recycled in the UK, how much that costs and who pays.
As Andy rightly says, it's not called the luxury car tax, so really should just be thought of as an expensive car tax!
But, let's face it, it was just brought in by the Tories as a tax on the lower down in society who like to gain a bit by getting a more expensive car or a normal car with lots of kit on it - while their millionaire buddies/funders pay the exact same fee on their Benrley's etc!
Perhaps someone could raise a petition to get it renamed as something like the 'mid range family car' tax. If we get 100,000 signatures it would have to be debated in parliament and might embarrass them into raising the limit.
Officially it is called ECS …Expensive Car Supplement
Absolutely, this needs to change. The government could also use it as an additional way of incentivising the move to more eco-friendly drive chain since they are already out of step with our European friends with regard to the removal of support for EVs at the time of purchase
I don’t think there should be a luxury car tax we are taxed to much anyway
Agree totally with everything you said here. I thought the 'luxury' tax came in on cars registered after 1st March 2017. The other irritation is why do hybrids and plug in hybrids only attract a £10 discount compared to petrol and diesel only cars, utter nonsense.
I agree I got rid of my Skoda Superb Diesel that did 55mpg and is euro 6 compliant. Company cars are incentivised to go EV or Hybrid. I do 700+ miles per week on average so an EV is out of the question due to time constraints. I bought a BMW 530e PHEV and get a lovely 26mpg which is obviously way better for the environment than my diesel ever was and therefore should get a much bigger discount!
If they want us to go on to all use evs, they should give pple an insentive todo so.
People are not paying road tax and insurance in their droves. What is happening is extortion and it's dangerous. Surely with more cars than ever in the road the costs should be coming down. Surely with cars being safer and cleaner than ever the costs should be the lowest ever. We need to cancel our direct debits and let the courts grind to a new legislative halt.
There is already a scalable tax on new cars proportional to their value. It's called VAT. Additional yearly tax is just grabbing.
I don't see why this VED element was ever added ... It's bonkers.
£40k?
I bought citroen diesel for less than £5k, £20 road tax. Full tank £80 and 750 miles. Awesome 👌
I'm looking to change my car, but I have been left limited as I refuse to pay £600 road tax. I could deal with it if it were for 2 years, but 5 years?! Outrageous.
Whats the point of working hard if thats all they do. Its the same with Council tax, the harder you work the more they screw you
Yes the tax system is seriously messed up. I think your suggestion is a very reasonable idea, although I am not sure it should start lower down.
I agree EVM
It should be normal tax rates until £55k then a staggered approach from there
Some company should put a ceiling on their luxury vehicles of £39,995 and hoover up the sales.
It isn't just VED that is the issue, your personal tax free allowance threshold hasn't increased for the last few years and is frozen for a few more years as well which is going to drag millions into higher tax rates. Tax free allowances for capital gains and dividends have also been slashed meaning more people are going to end up paying tax. It really is tax rises by stealth. I wouldn't have as many levels as you suggest but having a basic and higher rate would work for VED or may be three levels. The problem is getting everyone to agree what the thresholds are.
What is VED ? Is this what you used to call Road Tax as here in France we also had a road tax which was used for the upkeep of our major road network.
This was alas abandoned years ago as the people refused to pay on mass as it was seen to be unfair by the majority, that people from the poorest households thad did the fewest kms were expected to pay the same as what company car owners paid to travel hundreds of thousand kms.
This was then abandoned and instead added to the cost of petrol and diesel.
This meant that those doing the highest kms paid the Lions share and the poorest household's paid the least.
Incidentally we pay roughly the same as you pay in the UK for petrol and diesel. However, our road tax is included in the price of each litre.
We do have a number of toll motorways but it is only allowed to charge a toll when there is an equivalent high speed national road running in the same direction, this means that the average person in France seldom chooses to use the Toll roads as the road network in France is well maintained and instead it is mostly company car's and the likes, that are paying for the toll roads.
I have a choice when doing long distance road trips but mostly choose toll-free.
The inclusion of road tax into the cost of your fuel, does seem to be a much fairer solution that doesn't penalise road users doing the fewest kms.
Just a thought 🤔
@@loris2292it stands for vehicle excise duty which is basically what we used to call road tax. It used to be linked to vehicle emmisions so those which emitted the lowest grams per km of CO2 paid the least. Fairly recently it has changed to a flat rate for all vehicles plus this luxury element. It isn't linked to mileage so doesn't matter how many miles you do, it is the same rate.
@@loris2292 The way you collect your tax is fair, Yo pay for what you use
It’s called fiscal drag a sneaky means by which the Chancellor can increase tax take without admitting to have increased taxes. He is relying on this mechanism to try to reduce borrowing and debt post the Covid splurge. Even if you accept that there is a argument for a “luxury car tax” and that it should include EVs it really makes no sense that the same threshold should apply for EVs which are probably compared with their ICE equivalent at least 25% more. So perhaps a starting point of £50k would be more appropriate for an EV. This seems to be another example of completely muddled Govt thinking and contrary to encouraging drivers to switch to an EV. To my mind the Govt have been too generous in reducing Benefit in Kind taxation on EVs (and low emission hybrids) and the windfall these drivers have received should be reduced to fund a higher threshold for the luxury car tax on EVs.
Why is there another Tax on cars in the first place?... 1st we pay VAT on New Cars which is Tax then we pay Road Tax which is supposed to keep our roads in good condition..... Then there's Tax on the Vehicle Insurance & also Tax on the Fuel & sundries put inside the vehicle & now Tax for vehicles over £40000.00 🤬 I'd agree with Taxing actual luxury cars like certain top top Mercs, Audi's, Bentleys & Sports cars etc etc, but taxing cars at 40k makes no sense especially with EVs & current new car prices. Just another Cuntservative stealth tax 🤬🤯
I have a toyota RAV4 Excel which cost me £36k in October '21, so missed the tax. Others ordered the same car with just a couple of options in' 22 but had to wait up to a year due to Covid delays. When they finally arrived they found that they had to pay this additional tax as the list price had now exceeded the limit, even when Toyota honoured the original order price and this would apply to anyone caught out in similar situations going forwards.
It will also likely reduce sales tax income for UK HMRC as people will avoid more expensive new cars thus reducing sales tax but likely reducing people’s regular purchases of new cars and chase them to buy nearly new/used at under the original purchase of over £40k and avoid initial sales tax completely and slow down the new car sales
In BC, Canada, ours is taxed and depending on the price you pay. More provincial tax based on the cost of the car.
I bought a second hand BMW i3 which has a Rex and I have to pay £500 ved until it is 5 years old. The previous owner had added an up market interior, sunroof, self parking etc which made it approx £44,000 new.
Mine drops down to £180 per annum on New Years' Eve.
3.0 Diesel X3 M Sport with options - was about £50,000 in 2018 - £65,000 for an identical car today.
Also, more expensive cars already pay more tax. A 40k car already has 8k on vat on it! How much more does government want? Why do we accept it?
A tin box with a wheel in each corner is hardly a luxury item - and for some it is an essential, as 'public transport' in some areas is a joke.
I was in my local Ford agent recently, they had a couple of Focus models and they were over £40,000. For a Ford Focus! I don't know what the answer is but every government seems to think it's OK to tax the motorist more and more. I think we really need an import tax, anyone coming to this country to live should pay £40,000 per year. This can be offset against income tax and NI they pay. That should help.
Spot on. It penalizes the person buying a well specced Honda or VW just as much as the person buying a £4m hypercar. What was wrong with the old system based upon CO2 emissions? At least it encouraged lower emissions, these days emissions on many ICE cars actually seem to be higher as if the car isn't fully electric it makes no difference whether it emits 80g/km or 250g.
Yes it’s wrong, but HM Govt are after every penny they can get from the public any and every way they can! The rate for business mileage has not changed from 45p / mile for years despite massive inflation etc etc etc.
The governments attitude to so called 'luxury car tax' is no different to their attitude to many other taxes, in that thresholds are not being adjusted (on say an annual basis) to take account of inflation. So the tax burden is increasing year on year without the government doing anything. While the situation with the luxury car tax may seem unfair it pales into insignificance when compared with the impact of frozen personal allowances which is screwing the vast majority of the population. With the car tax then at least there is the choice in terms of not buying a new car, with frozen personal allowances no one has any choice at all. If the government are happy to screw everyone over on personal allowances then the thought of changing the car tax issue is pure fantasy. Any changes to taxation policy that we might say would be 'more fair' will almost certainly result in a reduced tax take which the government could not deal with and would result in increases somewhere else. This matter is pure politics and nothing to do with fairness or commonsense.
They tax anything and everything they can think of.. often with no logical reason.
if you want it to be scalable wouldn't a % of the price be easier and more granular. so for £40k at £390 that's 0.975%. apply that to all prices. then there's no dilemmas about picking an option because it jumps you to the next level of tax. the level of tax just rises gradually.
Had two golf GTI Performance a mk7 and then a mk7 facelift. Was about 31k and 33k for second. Price now not worth it. Replacing my Audi A5 Sportback with a new Renault Austral hybrid top spec and list is 39,995. Go for the matte roof and takes over. Went without the matte roof even though meant that had to wait (October build date). Talking with dealer they dropped the austral price so that below the 40k mark as about 100 over before. Lots of feedback at dealers that over 40k puts people off the car.
Would have an EV however 1st floor flat so no home charging possible. Hopefully govt will do some legislating for retro fitting estates with home rate charging to make more practical for people in flats or other housing that cannot do home charging currently.
Car manufacturers have to take some responsibility for the ridiculous recent increase in prices. The so called ‘tax reducing government’ we have will always carry on as normal and lie to us on a daily basis.
What's wrong is paying any "car tax" at all. As a general guide people should agree to pay between 7-10 years on average, then cease paying and keep driving. That is about enough to ensure if the Gov/Council were utilizing the money properly that they had enough to ensure the local area was being looked after (which it often isn't, thus further justifying not keep paying road tax evermore.)
My vw camper is over £800. Sunak banged up the tax on campers for a 6 month period based on the weight of the camping equipment added. Then he removed it but left vans in that 6 month window affected. My euro 6 van is £600 more to tax than older dirtier euro 4 diesels 😢
I had a base engine Volkswagen Polo (except strangely specced with active cruise control) as a courtesy car recently. When I looked up how much it cost it was a shock.
£40k in 2021 is now £46,940.18 according to the BofE inflation calculator
So do you think it should be raised annually ?
@@gingernutpreacheryes, that would be the easiest thing to do.
@@wizzyno1566 me to it's not unreasonable
It's older than that, I pay it on my Feb 2020 camper van
My 2018 car incurred this tax which was for the retail price even though I had a massive discount
Rip of Britain the tories couldn’t run a bath saved all my working career worked over 50 yrs as a truck-van tech so in retirement bought myself a new decent car over £40 k,my road tax is £560.00. Bearing in mind i paid on purchase price £11,500 in vat,believe me EVM man I’ve kept this clean 🤬🤬🤬🤬
It really does need raising to (imo) £60k. It’s been around longer than a couple of years though, I bought an Audi S3 in 2019 and need to pay luxury tax on that.
There is often confusion about the "price" of cars in relation to the £40k supplement. All figures relate to manufacturers list pricing.( in company car speak the P11d price). The price people pay for cars is often different, even significantly different, from the list price, however a 'negotiated' price will not take the car out of the supplemental bracket. Another aspect which I have seen people overlook is that the supplement applies from years 2 to 6 of the cars life, the first year is covered by so called 'showroom' tax so the 5 years takes you from 2 to 6 years old. If you find a nicely specced 3 year old car for £30k then the original list price will have been way over £40k so the supplemental loading continues into the cars life on the second hand market. Whether of not this is fair is missing the point the government will have plans for the tax take generated by the £40k supplement, if the tax take is eased by applying a tapering effect (which is obviously a very sensible idea) then that loss will have to be made up somewhere else. Sadly I don't think there will be many volunteers ready to step forward and pay more tax elsewhere so that the £40k supplement can be made more fair.
A year or so ago, I tried to work out a car tax system based around the weight and horsepower of a vehicle - with the intention to disadvantage drivers from choosing a more powerful, heavier, less efficient SUV model (either ICE or EV) versus a saloon / estate.
With one or two slight anomalies, it would've worked.
Families have seemingly survived perfectly well over the decades with saloons / hatchbacks / estate cars - to me (and I'm imagine most people with any concerns over the environmental) SUVs are just excessive, resource-wasteful 'status' symbols which 99.9% of the population simply don't actually need.
Next time you're on the motorway, just count how many SUVs have only 1 or 2 people in them - not necessary.
Next time you watch ANY movie / TV programme, see what type of 'car' the bad guys / drug gangsters drive as an "I'm richer / bigger / badder than you" status symbol.
Even if you get a discount to buy the car as I did which was thousand of pounds under 40K because MRP is over that price you still have to pay the higher tax
A lot of people don't think beyond their monthly payments on a new car so don't even know about road tax. Government also has to find some way of robbing us now that so many EVs charge at home :-(
Suggesting an alternative is accepting what is an evil tax. There should be no such thing as a luxury tax on anything - it's just a money grab. However, ours in Aus is even more evil; it was introduced as a way to keep Aussie manufacturing afloat, because we were uncompetitive with the Asians. The cash grab was used to subsidize local factories but, after some years, the gov wanted to keep it and did this plan - five years of cutting down the subsidies to zero, without removing the tax. Both Holden and Ford shut down before the zero subsidy (Irish?) year got here. So the premise for the tax no longer exists, but the tax is firmly entrenched. It's criminal.
The car manufacturers have been so desperate to chase the premium car market, they've discarded the entry level. It was working marginally when people had access to cheap finance but is completely unsustainable in an era of normal interest rates. Now they have lines of cars full of unnecessary gizmos that can't be easily removed (e.g. over-complex front/rear light assemblies) and a customer base that can't afford them (and, in ULEZ zones, can't afford to keep the clunker). They're going to have to adapt fast or we'll see brands go to the wall; it's going to be Rover but on a global scale.
Yes, we should raise the limits in line with inflation. This gov is very quick to increase car tax each year, but the thresholds should also be increased. Back in 2020 I was looking at a Tesla model 3 and a Ford Mustang Mach E. At the time I wanted to buy that were both below the £40k threshold. I know that electric cars were exempt at that time, but will be taxed from 2024. Anyway got the Outlander with the safety features, which put the list price over £40. However I got a £6k discount, so made the decision to go for it, as even with the lux tax, I was still £3.5k ahead. As pointed out in the comments, the more expensive the car, the less the tax has an effect.
If you hate EVs why are you watching this channel…that made me laugh thank you keep up the good work
How if I buy a car 2nd hand, below £40k? Do I pay extra road tax? Or if I buy it new, above £40k, and keep it until it dies, do I pay extra tax on it for all those years? This makes no sense. But it's just like all the other taxes that cause fiscal drag (such as inheritance tax): If you don't keep the thresholds updated by inflation, they become increasingly irrelevant, oppressive and ludicrous.
It’s not the car tax that needs looking at, it’s the car prices overall.
Hmm, people want pay rises, materials and components cost more - how do you fix that?
@@bobuk5722 yes, all of that is true, but £40,000 is to expensive for most people.
A few years ago I bought a used 2018 BMW i3S (lovely car by the ready). And because its original sale price was £42k I had to pay the loaded up VED. It was a shock for what was a used seeking price of £24k. I sold it off before the year was out and bought a new Tesla Model 3 for £32 and no "luxury tax".
Taxes should be both fair and proportionate. Not the blunt sledgehammer that it is today.
Most people who buy new cars, or even newish secondhand cars don’t really buy them, they rent them via a pcp, and sometimes more expensive cars can actually have a lower monthly “rental” than a car who’s list value is considerably higher.
Clearly there’s an argument that if you can put your hand into you pocket and produce £45k you can afford an extra £500 a year, but if you’re comparing cars based on £5k down and then paying off the depreciation you get weird situations where £50k cars cost less than a £30k over the 3/4 years of the pcp.
We still really need to go for a minimal flat rate and then road pricing. If the gov wants to tax “wealth” they should grow some stones and introduce another rate of income tax, rather than steal taxing a lot of stuff all over the place which assumes wealth but doesn’t necessary line up with reality
£40,000 list price (OTR including options) is the official threshold but you can disregard the £55 registration fee and the first year VED. So, that means you can go just over the threshold without having to pay the luxury tax for the next five years. The problem though it is the list price when registered which means if you order a brand new car below the threshold and the list price goes up before it is delivered, despite not having to pay the increased list price (assuming the price is protected) you would have to pay the luxury tax if that list price goes over the threshold.
IMO the luxury tax should apply to the list price applicable when the car is ordered and not when delivered and registered with the DVLA.
I understand it is for the price of the car when new. Do the government have a database of all sold car prices? How do they know and more importantly how do WE know how much a car cost when it was new. If i bought a 2nd Hand Tesla or Mach E or whatever that may have been well over £40k Originally but was now £25k-£35k how would they know if the car was going to get hot by the premium tax? I know the examples might not be the best but you get my point. Basically anyone selling a 2nd hand car should have to clearly declare if it will attract the higher tax.
It's always been bollocks just like the co2 thresholds for ice cars.
A focus ST for instance would have the same road tax as a V8 Range rover or Lambo.
They've never been about eco and saving the planet, it's just pure tax on the public because they can.
4:12 you say a Renault Capture with everything ticked. The Capture comes in a number of variants but there are no options available to choose from!
Welcome to "Fiscal Drift"! New taxes sound low to start with but then within a few years POW!
I agree with a staggered approach. I'm an ev owner too and I think all vehicles should be taxed more fairly in general. Zero tax for EVs isn't sustainable especially after 2030. My idea is vehicle weight (in tons) x mileage per year (taken from mot test) divided by 200. So for example if you do 10000 miles in a car that weighs 2 tons you pay £100 that year. Heavier vehicles will pay more but they also put more wear and tear on the roads and if not electric they will likely give more emissions too. Just an idea though
@@garysmith5025 I'm not sure there ever will be a perfect solution to the issue, and it's only an idea, I doubt my idea will ever be taken seriously by the people actually running the country. It just needs to be fairer and more sustainable for everyone
Certainly the threshold should be increased. Using the Bank of England's inflation calculator £40,000 in 2021 is equivalent to £46,940 today. However, many years ago, when company cars first started to be taxed, only those who earned over £8500 a year had to pay. This was never increased so more and more company car users passed the threshold each year until eventually virtually everyone had to pay the tax. Look at other taxes. The inheritance tax threshold has remained at £325,000 since 2009, and income tax thresholds have been frozen until 2028, so I can't see the luxury car tax threshold changing any time soon.
Road fund licence (car tax) is a totally unfair tax for low mileage drivers like myself. I drive about 2,500 miles per year but still pay the same as somebody driving 60,000 miles per year.
I agree. The new Mini hatch electric SE spec at Level 3 costs over £40,000!!
Don’t forget these tax structures are probably a long term way of gaining revenue back from the lack of fossil fuel sales when the EV thing gets forced on us going forwards.
The new Astra EV is over £40k. Luxury?
I’m probably miss understanding this tax as until recently it had not affected me. But I don’t understand why this tax exists in its current capacity. Why do we need to pay more tax on a vehicle that’s crossing the 40k threshold at all? I understood paying more tax on a car which had higher co2 emissions because the tax was there to incentivise the buyer to go for a more environmentally friendly vehicle or pay, but when I’m buying a car new or secondhand and the only reason I’m paying a higher tax is because I decided to go for either cruise control, heated seats, a reverse parking camera or a better sound system which takes me over a threshold, why am I expected to pay it? Not to mention it’s over 5 years. I purchased an Audi Q3 2019 in 2023 and the dealership ran the check to see if the car when new cost over 40k?? It didn’t thankfully but if it had I would have been paying over £570 a year?? It’s the lower powered model with lower emissions. Very strange.
Fell into this. I think of it as ' you little people have the nerve to want 4 wheel drive, big output engine, an estate AND be comfortable... Its an unfair tax, on cars that don't all the time, emit any more than a classic car. Plus, my car, 69 plate, is NOT worth 40k now, more like 27k on a good day. I can't see this changing and as always, suck it up....and thats why I opted for pure petrol as opposed to hybrid. Screw them
Paying £40k+ for an EV means people are usually factoring in the total cost of ownership (fuel etc).
So it is effectively paying for more running cost upfront (or over time if on finance). Should not be subject to additional tax, what we need is for fuel duty to be escalated as it should have been.
Looking at the Niro EV3 which I wouldn’t class as a luxury model but it is over £40,000 so a non starter for me unless that threshold goes up
I'd agree with the staggered rate, but it's time the threshold was re-calibrated to what is actually a luxury car. One element I think is unrealistic is that EVs are expensive at first but cost less to run later. I'm told the cross-over point is about 3 to 5 years, perhaps that should be put into the equation.
It depends on how much you drive, where you drive and whether you go into the London C-Zone. The more you spend on fuel per year, the more you effectively save. Maintenance costs are a lot lower too
@@SteveLoughranWe're talking new cars here. If you get a new car serviced by the dealer, service costs aren't that much different. About £100 a year for a leaf vs a note for instance.
Or 0.35% of the purchase price. Just noise really.
We are now the most taxed people in the G7 and it is getting worse and worse. More people in 40% tax threshold, higher VED charges, ULEZ which is another tax, probable move to per mile charging coming soon, let alone the higher energy costs while they make huge profits, big increases in Council Tax and general cost of living. The Government is trying to get us all out of owning a car. Maybe it is time to move overseas.
The grass is always greener...... except.. it isn't..!!
The whole things needs putting in the bin. We pay VED and that should be the mechanism that’s used. Not yet another tax.
This “tax bracket” should be index linked to MPs pay......
Why have all cars become so expensive? Mass production enabled cheap affordable cars to us all but now we are looking at the prices of a small flat to buy a car. Are PCP and other never never payment methods one of the causes or are they one of the solutions to car manufacturers high prices? Do we need our cars to be stuffed with “driver aids” or to pay for the development costs of “self driving vehicles” that nobody asked for?
Are car manufacturers making too much profit from us especially in the UK? The luxury car tax although annoying and yet another expense is a tiny amount compared to the PCP interest rates (unless they’re 0%) so again why are cars getting more expensive?
You’d imagine that most of the R&D into car safety and efficiency has been done, the principles learned and the costs now diminishing, but if new models appear every few years and require to go through the same or more rigorous testing (that will by then be more expensive due to inflation and added experts or regulations) R&D costs will rise with time.
Perhaps an analogy with energy efficiency is required, rather than buy a bigger boiler to heat a house with holes in the walls, fix and insulate it. So with cars, rather than add more and more gimmicks and testing regulations, cut down on the complexity and make them easy to maintain, cheap to run, last for longer and be more reliable? Of course this wouldn’t suit the manufacturers, the spares parts businesses, the garages or the recyclers but they are living off all of our backs and its getting harder to carry this lot of leaches as time goes on.
As several people have pointed out, this £40k VED tax point came in in 2017, but what seems to have been missed is that it replaced a graduated system based on CO2 emissions, so if you bought a V8 Range Rover (for example) it was a saving from year 2 onwards. Year 1 VED is still CO2 rated and can be costly, but of course gets "lost" in the overall price of the new car. Plus, your high CO2 car on the old system kept that tax rate for life whereas the new one drops to the standard rate after 6 years - result that very soon your 7 year old V8 Range Rover will cost less to tax than an old Ford Ka!
And yes, from 2025 EVs become included in the current scheme so, as things stand, if it cost over £40k new it will go to £560 a year. People need to be made aware of this!
Better alternative? Of course - as it was. For fossil fuel burning cars revert to banding based on CO2 and for EVs (given we must get caught up in this) then based on efficiency - miles per kWh derived from official testing (just as CO2 ratings are).
The tories introduced this tax just 3 years ago in preparation for when they start taxing EV's. They will not change the threshold and neither will any governnent elected next time because governments need money to provide services and infrastructure as well as pay MP's salaries, pensions and expenses.
I know you said not to focus on EV's but the retrospective impact on owners of used EV's is disproportionate and perhaps should be challenged. It's a regressive and retrospective tax. Imagine the government retrospectively adding a luxury homes tax or watch and jewellery tax? No, I don't either.
The tax punishes ordinary people disproportionately which is a tory trait. They don't care. It's a hidden and cynical element of the "war on motorists" which these hypocrites claim that they want to stop.
I am relieved that the used ID.3 1st Edition I bought in March 2023 cost when new in November 2020, £38.5k. not so great for most Tesla owners though as well as Audi, Mercedes, Porsche, etc.
Agree with a lot of the comments it should be lifted in line with inflation to account for the increase cost of the new car which a year ago wasn’t in that bracket but do to a price hike is. Or as a lot of the comments say stager the tax because how can a golf GTI be classified as a luxury car in the same way price wise as a Jaguar / Bentley as good as the golf is. Or a Kia Niro Ev which for the 4 spec modal is over £ 42,000. But the government won’t do anything because they see it as a means of increasing tax via the back door.
This was introduced approx mid 2017. Just shows how out of date it is now !
It shouldn't go up. Cars that come under the limit will sell more therefore more manufacturers will aim to be under the limit whilst also trying to be competitive on value.
The government already get 7K of VAT on a new 40K car. Why should they get any more?
This taxation was lazy. Most British manufactured cars are over £40k, so affects British industry. Car tax should be based on vehicle weight, more weight = more damage to roads. Emissions tax should be charged on fuel or based on miles for EVs, could be added to household elec bill. More miles = more fuel = more emissions = more tax. Rates can be different for diesel / petrol / electric to encourage the cleaner options
It needs to be higher than £40k or if it needs to not include the “extras”, just to account for the base cost.
The crime of it is that you need to wait after the car is 5 years old as a second hand proposition, if you don’t want to pay the luxury tax.
My view is a Norway style progressive weight tax which will discourage average people from their love affair with SUVs and encourage EV owners make purchases based on actual battery size needed as opposed to buying for the worst case scenario of 1 or 2 journeys per annum.
However no matter what approach is taken there will always be outliers and winners & losers.
Weight tax would be good as there's no reason a VW ID.3 at 1800kg should be billed at the same as a Mercedes ELC weighing in at 3000 kg
There goes the dream of an electric motorhome / vanlife.
I love my EV Zoe GT line. I think these higher VAT levels can eventually help incentivise the reduction of manufacturing costs and encourage car makers to introduce more affordable EV. There are examples of where no VAT doesn’t reduce the ticket price, such as children’s clothes which apparently has zero VAT but it has given suppliers the opportunity to charge to the limit the market will accept, hence children’s clothes aren’t 20% cheaper. I believe the Italian car makers produce smaller cheaper cars in the past because of their taxation rules in the 60’s 70’s which produced some amazing great small engine sized cars. I would go as far to welcome the higher tax starting at £30k. Yes a graduated tax rate makes sense, but the comparison to properties is skewed because house prices are more effected by land prices not manufacturing costs. If manufacturers don’t significantly reduce the everyday new EV cars prices then the EV revolution will stall.
Asking a single question as in this video is what has lead to the mess of taxes related to cars. Govt/motoring groups needs to sit down with a blank sheet of paper and decide how to raise taxes from motoring in a fairer way taking into account EVs and the phasing out of petrol/diesel. Basically a plan covering through to say end of 2040. Changes will occur every year/every 2 years to meet expenditure requirements. Eventually hitting a simple structure post-2040.
Sadly our government is great at introducing new taxes with a threshold at which the tax kicks in. What the government is not good at doing is raising those thresholds in line with inflation. So the £40 k threshold was introduced in 2021 to cars with a list price over £40k but to those emitting more than 150g/km. Almost everything has increased by 25% since the tax was introduced, as a result it won’t be long before all cars will be above the threshold, which as we know is frozen for the next few years. Sadly electric cars are, it seems not as popular as anticipated, mainly due to charging station availability.
Should simply be tied to median household or personal income (so it distinguishes between car price inflation and wage inflation - failure to do that would just be a tax break for those still rich enough to buy a new car, if car prices increase despite average earnings not increasing), and then, as you say, should be staggered so middle class car buyers aren't paying the same tax as millionaires and billionaires.
In Norway some services and taxes are tied to "G" a base amount for social security.
That number is updated every year by the Parliament.
When they do, every service or tax (tied to it) changes as well.
They can be defined as 0.5×G or 5×G, and all of them are updated at the same time by just one legislation.
The system isn't perfect, because many services and taxes aren't tied to it, even if (I think) it would be more logical. They have to be updated individually but rarely are, until suddenly after several years unchanged.